Thinking and planning out your future retirement can prove anxiety-inducing for many Americans. In fact, in early 2020, a survey of American workers found that 61% of them felt stressed about their retirement savings. Then the COVID-19 pandemic hit, causing more uncertainty and altering how people approached their savings as a whole. As circumstances change throughout the year, many people head into 2021 thinking about what they can do to get their retirement savings back on track with as little pain as possible. Thankfully, Total Resource Financial can provide insight if you are seeking to have your retirement savings going in the right direction again.
The following infographic provides a brief overview of the factors that can impact your retirement goals:
Incrementally Increase Your Savings
If you are participating in a retirement savings plan at work, you can do your part to get your savings strategy back on the right path. By increasing the amount of money you put into the account each paycheck, even by 1%, you can start to build it back up to the level it should be currently. After that initial 1% increase, you can continue to make incremental increases until you hit your maximum amount allowed.
Take Stock of Your Tax Situation
The pandemic shook many Americans to their financial cores this year. Drastic changes to their lifestyles will no doubt have an impact on their tax situations and retirement savings. If you are still unsure of the extent to which you will be impacted, take the time to consult with your financial advisor and discuss the standings of your retirement plan.
The tax situation in relation to your retirement plan hinges on whether you have a plan through your work, have one that you pay on your own, and your spouse's retirement plan situation. These factors determine whether you can contribute the maximum amount per month to your retirement fund or if there are certain limits in place that prevent you from doing so. Knowing the circumstances around your tax situation will help determine how quickly you can get your retirement savings trending in the right direction again.
Rebalance (Can Be) Necessary
The turbulent nature of 2020 may have necessitated drastic changes to how you contributed to your retirement fund. The market conditions may have dictated an aggressive approach or a more conservative approach to your retirement savings. Should your savings not rebalance automatically and return to a semblance of equilibrium, then you should take the time to rebalance your strategy. If the market conditions led to you taking a more aggressive approach, then you adjust your contributions to return to a more balanced approach. The same applies if you went with a more conservative approach.
Revisit Your Goals
As life during the pandemic changes, so do your overarching retirement goals. Consult your financial planner to assess the retirement investment options you have moving forward. Evaluating the kinds of significant life events that may have occurred over the past year and how they impacted your retirement goals will help you plan for your future retirement.
Know Your Retirement Plan's Features
For each company that offers a retirement plan for their employees, not every strategy will be built the same. In all likelihood, each company will offer different plans with different features, and there won't be one specific approach you can take that applies to every plan. Understanding the various features unique to your company's plan will help you refocus your efforts in the new year. Understanding if your company will match contributions, whether there is a vesting schedule for payments when the time comes, and whether or not the plan offers loans or hardship withdrawals will help inform your strategy moving forward.
Making the Most of 2021
The COVID-19 pandemic will eventually run its course, and life will return to a semblance of normalcy before you know it. Taking the time to address any issues with your retirement or legacy planning will help your financial situation in the long run and get you back on track to have a nice nest egg waiting for you in retirement. Contact Total Resource Financial to schedule a consultation today!